Most people know about IRA rollovers when employees leave a company and roll their retirement plan balance into an IRA, a market that has grown to over $7 trillion. But the idea and practice of roll-ins, or when an employee rolls in their account balance from a previous plan into their new employers’ plan, is relatively new. It’s a good practice for most and something that participants value according to a recent study by Boston Research Technologies and the Retirement Clearinghouse. [Download Report PDF here]
For more and more people, their 401(k)/Defined Contribution (DC) plan is their primary retirement savings vehicle. Many have multiple accounts at previous employers and IRAs. Worse, 24%-34% have cashed out their DC account depending on the generation causing severe penalties and taxes. As expected, cashouts are more frequent among lower income employees.
As many as 73% of plan participants would be willing to use and pay for an employer sponsored roll-in service which can take as much as two months to accomplish when employees do it on their own. And as many as 91% of employees would prefer to roll-in their previous balance rather than keep it in their previous employer’s plan or roll it into an IRA. Click here for more on usage of roll ins.
Why should employers care? Employees that have consolidated their retirement accounts will be able to better manage their finances spending less time at it and feeling more financially secure and less stressed resulting in better productivity. In addition, more assets in the retirement plan and higher account balances means more leverage and better service from their record keeper with little if any increased liability or costs. So why not ask your record keeper if they offer a roll in service and see what it would take to implement?
